Specifically, the IAEA complained that Iran had not met repeated UN demands to suspend its enrichment-related activities.

In Tehran, Jalil warned that a third round of UN sanctions would affect co-operation with the IAEA.

He said the report proved that Iran's atomic drive was peaceful and that claims of any military intentions "are not true".

"For those who had doubts about the Iranian nuclear programme, the report is very clear and indicates that the basis upon which the nuclear case was referred to the security council has collapsed," said Jalili.

UN officials in Vienna highlighted the positive aspects of the report, saying they had made "substantial progress".

"The work plan has started to kick in after so much scepticism," one of the officials close to the IAEA said, referring to a deal with Iran for full disclosure.

Push for sanctions

But the US said it would seek greater UN sanctions for as long as Iran refused to suspend uranium enrichment.

Gregory Schulte, the US envoy to the IAEA, said the report showed that Iran had "failed the test of full disclosure" because of its "selective and incomplete" co-operation.

"I don't think that China would want to be in a position to cause the failure of diplomacy to deal with this issue"

Zalmay Khalilzad, US envoy to UN

The US ambassador to the UN also criticised China for allegedly dragging its feet on a new resolution.

On Friday, China dealt a blow to the US-led Western efforts to increase diplomatic pressure by deciding to drop out of a meeting to discuss tougher sanctions against Tehran.

Political directors from Britain, France, Germany, the US, Russia and China were due to meet on November 19 to assess reports about Tehran's nuclear programme from the UN and from Javier Solana, the EU foreign policy chief.

Separately, Russia, which like China opposes further UN sanctions against Iran, announced that the IAEA would soon start inspecting and sealing atomic fuel bound for an Iranian reactor.

Fuel shipment

Russian state-owned nuclear fuel producer TVEL said inspectors from the IAEA will begin preparatory work on November 26 on a shipment of nuclear fuel bound for the Bushehr nuclear plant.

"We are ready to provide IAEA specialists with all the conditions they need to do their work," Konstantin Grabelnikov, deputy head of Russia's Novosibirsk Chemical Concentrate Plant, which is preparing the fuel, said in a statement.

Russia has given no specific date when it will send the nuclear fuel to Bushehr, but says it would be sent six months before the plant's start-up.